Friday, August 9, 2013

Economy Will Sink if the FED Tapers

If the Federal Reserve does begin to taper its stimulus in September, a slowing economy will force it to reverse course and restore its monthly $85 billion asset purchases, predicts Jim Rickards, managing director of Tangent Capital and author of the 2011 best-seller "Currency Wars."

If the central bank is going to taper its stimulus this year, it will do it in September, he told CNBC, because the Fed will want to explain its decision and the only meetings for the Federal Open Market Committee (FOMC) to hold a press conference after the meeting are in September and December.

"If they taper, it will be at an FOMC meeting with a press conference because the move is so significant the Fed will want the press conference to explain very carefully what they have done," Rickards told CNBC.
The December meeting, he explained, is too near Fed Chairman Ben Bernanke's expected exit in January to announce a monetary policy change.

"However, if the Fed does taper in September, they will find the economy sinks much faster than expected and ... they will have to increase asset purchases by early 2014."

- Source, Money News: